“Heracles managed to successfully complete 12 labors. Today’s Greece looks like the hero of mythology, when he was halfway there.” Borrowing terms from Greek mythology, the Reuters columnist, Hugo Dixon, refers to the difficult path of reforms that Greece has to go through and the challenges that the ND president will have to face. Kyriakos Mitsotakis, if he takes over the reins of the country again.

The Reuters report points out that the country has done a lot of work to rebuild its economy after the debt crisis, but still has a way to go. As pointed out, “Greece’s large current account deficit and corruption undermine the attractiveness of the country as an investment destination”. However, as the columnist estimates, it is not clear that Kyriakos Mitsotakis will do what is necessary if he is re-elected.

“Investors are excited” about the prospect of a ND government

“Greece is no longer the “problem child” of the Eurozone that a decade ago threatened to collapse the single currency. Investors are excited by the prospect of Kyriakos Mitsotakis’ centre-right party winning a majority in the second round of elections, which will be held on June 25. The question is whether Greece will be able to attract investments to the extent it needs. This will require reforms that will not be easy,” he notes, among other things.

Hugo Dixon then refers to the country’s positive performance, while pointing out the problems that pose obstacles: “While Mitsotakis is rightly credited with attracting investment and promoting the digitization of government, his government did little to address the other problems of the country. Tax evasion is still rampant and the judicial system is weak. Furthermore, Mitsotakis has shown little willingness to investigate why the phones of Greek politicians, journalists and other prominent figures were found with the Predator malware. Mitsotakis says his government is not involved.”

It is true that the Greek economy experienced a faster recovery after the Covid-19 pandemic than most countries in the European Union, registering a cumulative growth of 15% in the last two years. But that’s partly because the country benefited from reforms imposed by the International Monetary Fund and the E.U. as the price of bailouts, the columnist explains and continues: Growth was also strong because Mitsotakis allocated large sums in benefits in recent years. For example, subsidies to protect consumers and businesses from the energy crisis were among the highest in the EU.

The “Achilles heel”

The article then focuses on the “Achilles heel” of the Greek economy by pointing out: Greece’s current account deficit last year represented 9.7% of GDP. The rise in energy prices represents about 40%, according to the Bank of Greece.

Greece is once again living beyond its means. This time, it is the private sector that is creating debt at a rapid rate. Consumption is at 67% of domestic income, compared to the EU average. which is 50%. Moreover, investment still only reaches 14% of GDP and is expected to reach closer to the European average of 23% in Mitsotakis’ second term, giving a boost to the country’s long-term growth prospects. The BoE expects European funds to contribute significantly, contributing a total of around €70 billion by 2026.

However, in the long run the country will not be able to sustain a much higher investment rate unless it saves more. Otherwise, Greece will continue to run a high current account deficit, which could be dangerous in a world of higher interest rates, the author points out.

“Mitsotakis could fix the problem. First, it could wean citizens off benefits, focusing government aid on the most vulnerable. It could also crack down more heavily on tax evasion, not only by the self-employed but also by oligarchs. But it is unclear whether he will tackle this particular project. After all, he gave what amounted to amnesty to major tax evaders during his first term,” he adds.
The reforms, it is pointed out, can eliminate the budget deficit, allowing the government to continue reducing debt as a percentage of GDP. Well-designed tax and benefit reforms could even lower the country’s unemployment rate, which is currently 12%, thereby increasing its productive potential. All of this would provide a cushion if Greece or the global economy is hit by further shocks in the coming years.

“The Stables of Augeas”

“Mitsotakis says he needs a large majority to proceed with the reforms. The main priority should be a cluster of problems that fall under the rule of law: the informal economy, wiretapping, corruption and issues with the judicial system,” notes the Reuters report. As reported “Greece ranked 51st in Transparency International’s Corruption Perceptions Index last year. This is an improvement from the 60th place the country had when Mr. Mitsotakis took office, but it is still one of the lowest places among EU countries. This acts as a brake on investment. The centre-right leader promised to speed up justice through the courts. After all, slow justice is no justice.”

Mitsotakis should make zero tolerance for corruption within government one of her top priorities, says an adviser. And he could go against the grain by launching a thorough independent investigation into the surveillance malware case. One of the labors of Hercules was to clean the stables of Augeas. Mitsotakis has a great chance to do the same for Greece. It remains to be seen if he will seize it,” the article concludes.